It is a great pleasure to speak to you on a topic that lies at the heart of the OECD’s mandate: climate change and global governance. climate change is the global challenge par excellence, one that cannot be addressed by any country alone and one that inevitably calls for multilevel governance approaches. Cities are part of the solution.

For this reason I am very pleased that this Conference is urbanising the climate change debate. This is where climate change will mainly need to be addressed. Your attendance here from 21 cities, 17 countries, and 10 international organisations, not to mention a number of important non-governmental organisations or companies, pays tribute to the importance of multilevel mobilisation of effort around climate change.

The OECD Environmental Outlook to 2030 projected that, if we continue on a business as usual path, global greenhouse gas emissions will grow by over 50% by 2050; which will cause world temperatures to rise between 1.7 and 2.4 degrees Celsius above pre-industrial levels by 2050, and between 4 and 6 degrees Celsius or more in the long-term. This pace of change is ten times greater than that experienced since the last Ice Age.

Climate change will impact on our health, our security and our economies. The damage could be large and irreversible. This means we need to act now. Moving forward will not be cheap but doing nothing is not an option. In fact, inaction would be even more costly. The key question is thus how to find the best way to move forward. This is where the OECD’s more than 20 years experience on the economics of climate change makes a difference.

Our work shows that a cost-effective strategy to tackle climate change will need to emphasise instruments that put a price on greenhouse gas emissions, covering as many countries, sectors and greenhouse gases as possible. Cap-and-trade schemes, or emission taxes are cost effective because they induce firms to look for abatement options where they are cheapest, and boost incentives to scale up climate-friendly R&D. These economic instruments need to be complemented by other policies to help address market and information failures. For example, the lack of information about energy-efficiency performance of electrical appliances and light bulbs may prevent households from optimising energy consumption. Such specific problems can be addressed through energy efficiency standards, or eco-labelling requirements. Both are areas where municipal policies can have a big impact.

Climate change is a comprehensive challenge. Addressing it successfully will need the combined partnership of national governments worldwide, local authorities -including cities -, the energy industry, other business and consumers. We are already seeing action by many of these partners, but a more co-ordinated, comprehensive and ambitious response is needed. This will also require addressing the difficult problem of how to distribute costs among the different players. The OECD is currently extending its analysis of the costs and impacts of different policy mixes to address climate change. The results of this work will be available in autumn and will feed into the UNFCCC’s process leading up to the 15th Conference of the Parties in Copenhagen at the end of 2009.

We need the commitment and involvement of all countries, all regions and all cities if we are to move forward. What happens on the global scene is replicated at the local level. In many ways, the global challenge is made up of many smaller problems that are even more visible at the local level.
Two key facts can illustrate the central role of cities and metropolitan policies in addressing the challenge of climate change:

1. Urban areas make up just two percent of the world’s surface but consume between 60 and 80 percent of commercial energy.

2. Climate change is already having a large impact on cities: hurricanes and floods have destroyed urban infrastructure, rising sea levels have altered real estate markets, and heat waves have produced power outages, harmed agriculture and most importantly put people’s lives at stake.

Apart from preventing health, environment and economic losses, there is also a strong business case for taking action at the city level. Companies value clean and safe environments to do business and action on climate change can also serve to create new business opportunities, for example in the area of green buildings or clean technology. This will require a new set of policies that stimulate and enable a “green economy” to flourish.

But we will also need better tools to protect cities and their inhabitants from the effects of inevitable climate change. Today, the OECD is releasing, jointly with the Danish authorities, a new case study on Copenhagen as part of our project on Cities and Climate Change. This ongoing project assesses climate change impacts, sea level rise and storm surge risk in port cities. We found that Copenhagen’s existing dikes and sea walls are able to face significant sea level rise, but they need to be upgraded. Otherwise, a storm surge with one-out-of-ten chance of occurring every year would cost Copenhagen 2.5 billion Euros. And the economic costs would be much higher in many cities worldwide, especially in developing countries, where comprehensive flood defense infrastructure and risk management plans may be weaker. We are currently carrying out another case study on Mumbai, a city which has experienced increasingly significant flood damages in recent years.

Let me now turn to the policy conclusions. What can be done in concrete terms to “urbanise” the climate change debate?

First and foremost, cities and nations need to collaborate better on climate change. This would ensure coherence of local and national action, while clearly acknowledging differences in the mandates of cities and national governments. City and sub-national regional leaders are generally best suited to design strategies to address their infrastructure needs, land use, geography, and economic profiles. Central governments, in turn, can set out the broad goals and frameworks to encourage action in the right areas; they can also provide needed funding or other incentives for city initiatives. Together they could work closer together to develop and exchange information about possible policy responses, to experiment with new solutions, to share experience and broaden and replicate successful initiatives.

But currently, there is no common set of urban environmental indicators that could facilitate the exchange of experiences and enable comparisons. Each city uses its own methodology to measure contamination and compliance with regulations. Here is where the OECD could contribute by joining other partners to help development and promote harmonised reporting frameworks to assess and measure progress towards carbon emission reduction across cities. The OECD can also help in pooling knowledge on the best tools for multi-level governmental collaboration in addressing climate change.

Momentum is building to mainstream policies for the “green economy” and climate smart cities. Some progressive cities are already providing financial incentives for cleaner public transportation, for green buildings, and for renewable energy.

To name just a few examples: In Pittsburgh, the city’s Urban Redevelopment Authority offers loans at lower interest rates for projects that earn green building certification. Cities throughout Italy, Japan, and Canada have distributed “smart metres” to homes, which allow citizens to adjust their energy consumption in real time rather than after receiving a bill at the end of the month. City governments, which are often the largest local employers, are also beginning to hold themselves accountable by mandating “green tendering” procedures that limit their own carbon and other environmental footprints.

Many more cities are taking path-breaking action around climate change, but more often than not their experiences fail to inform policy at the national level. A richer and more structured interaction between cities and national governments could help create improved tools to support the “green economy” and the “climate smart” urban economy.

This morning I took part in the Roundtable on Urban Strategy of Mayors and Ministers whose participants discussed many of these issues. Mayors and Ministers underscored the need for stronger partnerships between cities, national governments and international organisations to more effectively contribute to climate policy responses. They called upon the OECD to help systematise city experience, to draw out good practice and to help them measure their performance. They also asked the OECD to help them become more active in international markets to reduce emissions. We will work in partnership with our member governments and their cities to bring city level perspectives experience to bear on the climate discussions and energy frameworks for policy.

At the OECD, we will continue to support our leaders to establish cost-effective climate change policies and encourage them to involve cities as major actors in these debates. During the time of this plenary alone another ten thousand people will migrate from rural areas to cities. There they will contribute to the economy, but also consume energy, produce waste and boost GHG emissions.

How cities develop will determine our collective ability to address climate change. It will be decisive in driving world green-house gas emissions up or down and it will determine how vulnerable we are to climate change impacts. The time has come to bring the experience and the capacity of cities to deal with the development and climate change challenge to the front of the climate debate. We need to empower cities to do the right things on climate change and we need to learn from their experience.

The OECD stands ready to help in addressing this challenge of multilevel global environmental governance to tackle climate change and we look forward to working with you to make this world a better and more livable place for our children and grandchildren.